Defining “Poverty”: Pro-Poor Principles series

Pro-Poor Principles series
On 15 May 2013 we announced our Pro-Poor Principles in a blog post, found here. In this continuing series of blog posts, we will elaborate on the path that brought us to these Pro-Poor Principles of microfinance. The principles will inform both the learning environment in our community of practice, as well as our methodology for determining organizations that will be recognized by the Pro-Poor Seal of Excellence. We appreciate any thoughts you have on the Pro-Poor Principles and how best to apply them to practice. If you would like more information, please contact MeasureLearnChange[at]gmail.com.

Defining “Poverty”

A simple plan
There have been many varied measures of poverty established over the past two decades in our global efforts to alleviate poverty. Hundreds of National Poverty Lines have been established by individual country governments, and institutions such as the World Bank have used figures ranging anywhere from $1.00 to $2.50 per day. Individual academics and organizations have even developed their own poverty indicators to address the complexity of poverty measurement. When looking to benchmark poverty in a way that is not overly complicated, yet still recognizes the regional diversity of countries across the globe, our approach builds upon the work of all of those in the field of poverty alleviation who have sought to determine a poverty line.

As a simple global benchmark, we reference a poverty line that
approximates the bottom ~40% of the population.

graphic designed by Frances Sinha

As a simple global benchmark, we reference a poverty line that approximates the bottom ~40% of the population. In many countries, the national poverty line is about the same as the bottom ~40%, as can be see in the graph below. This definition intentionally reflects a level that is practical, achievable and relevant to ensuring deep financial inclusion. Broadly, it represents outreach to the bottom half of the financially excluded. At the same time, in order to recognize MFIs that have achieved deeper outreach to the very poor, the Seal of Excellence indicators identify the percentage of clients from the bottom ~20% as well.

Acknowledging complexity
In reality, however, we know that defining poverty is anything but simple! While it is certainly important to ensure that the data collection required is straightforward and the cost remains accessible for practitioners, accounting for contextual factors is also essential in an accurate methodology. For example, when we look to determine what is poverty in Jordan, Cameroon, Bulgaria, India, Cambodia, and Honduras – it is clear we will see quite different contexts in these countries. In order to account for this context, specific reference points will be defined country by country: in low income countries, the benchmark may approach ~60%, while in high-income countries, it may be only ~20% – these are exceptions made for the outliers, but for the majority of developing countries, the “bottom ~40%” seems to most closely approximate how the nations themselves define poverty.

Our definition of poverty will also account for sub-national differences in context, as can be seen in India, for example, with the rural Manipur region outside Bangladesh and the Rohini region, where we find New Delhi. We will recognize both rural and urban poverty, outreach to marginalized communities, and other indicators of poverty used by an MFI.

What does the “bottom ~40%” bring to mind in your country?
What are the factors influencing complexity in your area?
Is there a greater need for simplicity or for regional complexity in defining poverty?

 

Questions? Comments?
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